From the start, has been seen as something of a ‘behind closed doors’ asset. With SilkRoad and other black market sites been heavily dependent, the image has not been good.
While this has begun to change, and the general public has started to hear more positive reports, things are still touch and go. And the main cause of the loss of consumer confidence in the is the almost incessant security breaches that plague the industry.
A quick summary
Because is a digital currency, the potential for hacking is extreme. Of course, this is also true of banking institutions that handle digital funds, but it seems more prevalent in . In fact, the total for stolen funds in —a massive amount of loss for an industry just ten years old.
And, for those who think the direction is positive, and security is improving, statistics show that more than 61% of the losses occurred in 2018. It seems that as values for increase, the motivation to steal them increases proportionately.
Seeking solutions
This increase in security failures is due, in large part, to the early stage of of the industry. While banks have had thirty years of digital transactions to improve security, has been around just ten. The nascent technology has left gaps for some to exploit, and exchanges are the biggest culprit.
But beyond simply security threats, exchanges are often their own worst enemy. For example, the recent of the of QuadrigaCX, and the loss of his personally held private keys for investor funds only highlights the need for better and stricter exchange policies.
This has led investors to pursue new and more secure exchange options, and particularly those with financial backing. Exchanges that refuse to move toward security and fiscal responsibility will eventually be left on the sideline.
Secure and backed
One such example of this new exchange model is or FTX for short. The company has the backing of Alameda Research, responsible for more than $1 billion in trades. With this level of external support, the exchange offers a level of investor security that is rarely available in the world. Plus, they have created some of the tightest security protocols around.
Other exchanges are coming into the market or seeking to enhance their value proposition as well. The main goal is to allow the freedom of financial transacting that has characterized and , while at the same time protecting investor funds. This sort of ‘safe/freedom’ model has been tricky to provide but is growing.
Of course, as with most assets, and can be stored offline for maximum security. Simply storing private keys on a hardware or paper will make the coins effectively 100% safe for users. But this defeats the purpose of a cash/payment methodology originally conceived by creator Satoshi Nakamoto.
Crushing the market
As security threats continue, the cycle for has begun to slow. No wonder the euphoria of 2017 turned into the crypto winter of 2018. What seemed a great opportunity for quick returns turned into a security nightmare.
And, convincing banks and business owners to offer support for payments and transfers is an uphill battle. The risks associated with moving into the space are dramatic. And, given the risks, the cost associated with creating the necessary security protocols can be dramatic.
Of course, those costs can be offset by market gains and profits. And, the current bull run that is experiencing should provide additional incentive. However, the end game of market won’t be easy to achieve without massive change.
Whether and its cousins eventually grow in remains to be seen. However, the great need in the market is not another low-security exchange startup. Instead, the market must find ways to bring well-funded, secure exchanges online for consumers to use. Without these types of market enhancements will stagnate and the market will be crushed before it reaches maturity.
Published at Tue, 30 Apr 2019 21:01:52 +0000
